Our company has hired a premises for office purpose. As per the terms of agreement apart from rent our company has to reimburse 50% of Municipal Tax paid by Landlord. Do we need to deduct TDS on this reimbursement? can it actually be termed as reimbursement? One of my colleague has opined that TDS is not applicable taking the reference of CBDT.Circular 718. But my understanding is that Circular 718 talks about taxes on leased property paid by tenant. But in the present case it is actually paid by the landlord and later on part of the same has been billed on tenant. Please advice.
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Tds u/s 194 i on reimburesement of municipal tax
Replies (7)
In my opinion, tds is applicable as on rent. Since tax paid is not in your name, the amt paid by you is nothing but increment of rent. Treat the whole amt as rent
From my opinion it depends on your terms of agreement and nature of expenses booked by u in yr accounts ie as muncipal tax or rent .if it is rent then deduct TDS else show it as local taxes paid .
dear all
i think tds is applicble on rent
tks & regards
ramanuj
Shivekumar
Your colleague is right. Municipal Tax is not subject to TDS. What is liable under section 194I for TDS is Rent and Rent is clearly defined in Income Tax. Rent does not include Municipal Tax and as per Circular 718 it is clear that in no way TDS can be deducted on municipal tax born by tenant.
I agree with Ajit sir.
Dear All, Thanks for your repose.
depends on the accounting method,
if the expense is booked under the head "rent" then TDS would be applicable
if booked under Municipal Tax head then not applicable,
irrespective of the fact that its paid directly or through landlord
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